OVERVIEW

Report of Investigation
Concerning Allegations of Connections
Between CIA and The Contras in Cocaine
Trafficking to the United States
(96-0143-IG)

In August 1996, the San JoseMercury News published the "Dark
Alliance" series of articles alleging, among other things, that cocaine was
"virtually unobtainable in black neighborhoods before members of the CIA's
army"--the Nicaraguan Contras--started bringing it into South Central Los
Angeles in the 1980s. The articles stated that Danilo Blandon, identified as a
former Contra leader and a supplier of cocaine to Los Angeles drug dealer Ricky
Ross, had testified in court that his cocaine profits supported the Contras, and
that Blandon's attorney had concluded that Blandon was selling cocaine for CIA.

The articles also reported that major narcotics trafficker Norwin Meneses
had a relationship with the Contras, that CIA or others had hampered the
criminal investigation of Meneses and that a relative of Meneses alleged that
Meneses had financed the Contras. The articles also claimed that an associate
of Blandon, Ronald Lister, was connected to CIA.

Further, the articles claimed that Carlos Cabezas, who had been convicted in
a 1983 San Francisco drug prosecution known as "The Frogman Case," was
connected to Meneses and that Cabezas had obtained cocaine from drug trafficker
Horacio Pereira, who had contact with the Contras. Finally, the articles
reported that funds that had been seized from Julio Zavala, a leader of the
prosecuted drug ring, had been returned to him by the U.S. Attorney's Office
because of Zavala's claim that the money belonged to the Contras.

The Office of Inspector General Investigation

Director of Central Intelligence John Deutch asked the CIA Inspector General
to investigate these allegations of connections between CIA, the Contras and
drug trafficking. A 17-person team was formed to conduct the investigation and
to work closely with the Department of Justice/Office of the Inspector General.
The team reviewed 250,000 pages of documents and conducted over 365 interviews,
most under oath, including current and former CIA employees, other current and
former U.S. Government officials, as well as private citizens and foreign
nationals. The principal individuals discussed in the San Jose Mercury News
articles, including Ross, Blandon, Meneses, Lister, Zavala, and Cabezas, were
among those interviewed. The Office of Inspector General interviews involved
travel to four continents and throughout the United States.

Investigative Findings: Ross, Blandon, Meneses, and Lister

Ricky Ross. There has never been any CIA relationship with
Ricky Ross. Ross states that he provided no money to the Contras and had no
contact with the Contras or CIA. Ross also denies that CIA or the Contras had
anything to do with his drug trafficking.

Ross says he began dealing cocaine in 1979 or 1980 and learned to make "crack"
in 1981 from another acquaintance in Los Angeles, not CIA. He met Blandon in
1983 and claims to have become the largest Los Angeles cocaine dealer before
ever meeting Blandon. Ross claims to have purchased 100 kilograms of cocaine
weekly from Blandon and 40 to 100 kilograms a week from another dealer, Ivan
Torres. Ross says he obtained cocaine from Blandon until 1988 or 1989.

Ross says he believes that CIA was involved with Blandon. However, he says
this belief is based solely on what he has learned from the media. Ross says he
has no knowledge of any contacts between Blandon and CIA.

Danilo Blandon. There has never been any CIA
relationship with Danilo Blandon, and CIA was unaware of Blandon until 1986 when
he was arrested and reportedly claimed a CIA connection. At the request of the
FBI, CIA checked its records at that time and found no information in its
possession regarding Blandon.

Blandon says that he has never had any relationship with CIA, was never
approached by the Contras to raise money by drug trafficking and did not provide
millions of dollars to the Contras as has been alleged in the media. He recalls
giving several thousand dollars to support the operating expenses of Contra
sympathizers in California in the 1980s, and he recalls providing several
thousand dollars, the use of two automobiles and accommodations in Costa Rica to
Contra leader Eden Pastora on a personal basis.

Blandon says he met Norwin Meneses in 1981, and Meneses supplied him with
cocaine to sell from then until 1983 when they had a dispute. Blandon says he
met Ross in 1984, began selling him cocaine in 1985 and stopped in 1986.
Blandon says he provided Ross as much as 50 kilograms at a time, but denies
Ross' claim that he provided as much as 100 kilograms weekly.

Norwin Meneses. There has never been any CIA relationship
with Norwin Meneses. CIA records indicate that Meneses' name appeared on
occasion in CIA intelligence reports regarding drug trafficking and that
information was shared with U.S. law enforcement agencies. Meneses denies any
contact or relationship with CIA.

Meneses says he was associated with the Contras, but denies he ever raised
any money for Contra organizations through drug trafficking. He also says that
he is not aware of any Contra involvement in drug trafficking. Meneses says
that his only contribution to the Contras was an estimated $3,000 that he gave
to a group of Contra sympathizers in California to support their administrative
expenses between 1982 and 1984.

Ronald Lister. There has never been any CIA relationship
with Ronald Lister despite any claims he may have made to the contrary. Lister
says he has never been a CIA employee and was never asked by CIA to assist
Blandon or the Contras in any way. Lister also says that he and Blandon engaged
in their drug trafficking activities for personal profit and did not do so on
behalf of CIA or the Contras.

In 1983, more than 50 individuals, including many Nicaraguans, were arrested
in the San Francisco area for cocaine trafficking in what was known as "The
Frogman Case." None of those who were arrested or charged had
relationships with CIA, though a relative of one of them had a relationship with
CIA until mid-1982. None claimed a Contra or a CIA connection at the time.
Later, two of those arrested--Julio Zavala and Carlos Cabezas--claimed links to
the Contras. Cabezas also later alleged that he engaged in cocaine trafficking
to support the Contras.

Julio Zavala. In 1984, CIA became aware of The Frogman
Case and Zavala when it was learned that representatives of the U.S. Attorney's
Office in San Francisco were planning to travel to Costa Rica for the
depositions of two Nicaraguans. The depositions had been requested by Zavala's
lawyers.

The Nicaraguans who were to be deposed were members of Contra organizations
and had provided letters attesting to the truthfulness of Zavala's claim that
the approximately $36,000 that was seized when he was arrested belonged to the
Contras. It appears that the letters were obtained through Zavala's wife's
connections with family friends and not because he was active in any Contra
group. In fact, the principal author of the letters was reportedly expelled
from a Contra group when its leadership learned that he had done so and he could
not explain the basis for his actions.

Based upon the information available to them at the time, CIA personnel
reached the erroneous conclusion that one of the two individuals who was to be
deposed was a former CIA asset. Subsequently, an attorney from the Agency's
Office of General Counsel (OGC) met with the responsible U.S. Attorney (AUSA).
CIA believed that the proposed depositions in Costa Rica might lead to a Contra
support group in which it had an operational interest.

The AUSA already had discussed with Zavala's lawyer the possibility of
returning the seized money rather than traveling to Costa Rica for the
depositions, the purpose of which was ostensibly to establish who owned the
money. The money, which may, in fact, have been profit from drug trafficking,
was ultimately returned to Zavala.

A CIA cable, written by the OGC attorney who met with the AUSA, indicated
that the $36,000 seized from Zavala was returned to Zavala at CIA's request.
The AUSA, the former U.S. Attorney and others involved in the prosecution state,
however, that the decision to return the money to Zavala was based on their own
judgment as to whether the expense and effort of traveling to Costa Rica was
necessary to prove their case and not on CIA's representations. Zavala was
subsequently convicted and sentenced to prison.

Carlos Cabezas. Cabezas was arrested, convicted
and sentenced in connection with The Frogman Case. Cabezas says that he began
bringing cocaine into the United States in 1981 with Zavala, Troilo Sanchez and
Horacio Pereira. According to Cabezas, Zavala had his own drug network, but
also was part of a second network that sold cocaine for the Contras. Cabezas
also claims he witnessed Pereira deliver money to a Contra member. However,
Cabezas' drug associates in The Frogman Case, the FBI Special Agents who
investigated The Frogman Case and U.S. Attorney's Office personnel who were
responsible for the prosecution dispute these claims. They recall no evidence
being developed during the extensive investigations of any connection between
Cabezas and the Contras. Nor has any information been found to support Cabezas'
subsequent claims that he had connections to the Contras or that he engaged in
drug trafficking on behalf of the Contras.

Norwin Meneses. No information has been found to
connect Meneses with The Frogman Case. Meneses says he was never part of the
Zavala organization. Zavala and Cabezas confirm this assertion.

Did CIA have any relationship or dealings with Ross, Blandon or Meneses?
No information has been found to indicate that any past or present employee of
CIA, or anyone acting on behalf of CIA, had any direct or indirect dealing with
Ricky Ross, Oscar Danilo Blandon or Juan Norwin Meneses. Additionally, no
information has been found to indicate that CIA had any relationship or contact
with Ronald J. Lister or David Scott Weekly, the person Lister allegedly claimed
was his CIA contact. No information has been found to indicate that any of
these individuals was ever employed by CIA, or met by CIA employees or anyone
acting on CIA's behalf.

Was the drug trafficking of Ross, Blandon or Meneses linked to CIA or
Contra activities? No information has been found to indicate that Ross
provided any money to any Contra group at any time, or that he had any contact
or connection to the Contras or CIA.

No information has been found to indicate that the drug trafficking
activities of Blandon and Meneses were motivated by any commitment to support
the Contra cause or Contra activities undertaken by CIA.

Blandon and Meneses claim that they each donated between $3,000 and $40,000
to Contra sympathizers in Los Angeles. No information has been found to
substantiate these claims. Moreover, no information has been found to indicate
that Meneses or Blandon received any CIA or Contra support for their drug
trafficking activities.

Blandon did have a personal relationship with Eden Pastora and provided him
with financial assistance in the form of rent-free housing and two vehicles.
Much of this assistance was provided to Pastora after he left the Contra
movement.

Did CIA intervene or otherwise play a role in any investigative and
judicial processes involving the drug trafficking activities of Ross, Blandon or
Meneses? No information has been found to indicate that CIA hindered, or
otherwise intervened in, the investigation, arrest, prosecution, or conviction
of Ross, Blandon or Meneses. CIA shared what information it had--specifically
on Meneses' 1979 drug trafficking in Nicaragua--with U.S. law enforcement
entities when it was received and again when subsequently requested by the FBI.

Did any of the individuals who were arrested in "The Frogman Case"
have any relationship with CIA? Were the drug trafficking activities of any of
those individuals linked to the Contras? No information has been found to
indicate that CIA or individuals acting on behalf of CIA had any relationship
with Julio Zavala, Carlos Cabezas or others who were arrested or charged in
connection with the 1983 Frogman Case, though a relative of one of them had a
relationship with CIA until mid-1982.

No information has been found to indicate that Julio Zavala, Carlos Cabezas
or other Frogman Case defendants were connected to the Contras or that the
Contras benefited from their drug trafficking activities. No information has
been found to support Cabezas' claim that he provided financial assistance to
the Contras from his drug trafficking activities. While two individuals who
were active in the Contra movement wrote letters supporting Zavala's claim that
seized money belonged to the Contras, it appears this was done through Zavala's
wife's connections to old family friends and not because Zavala was active in
the Contra movement.

Was CIA involved in the investigation of The Frogman Case? No
information has been found to indicate that CIA or anyone acting on behalf of
CIA was involved in the criminal investigation of Julio Zavala and his
associates, though a relative of one of those arrested or charged did have a
relationship with CIA until mid-1982.

To what extent and why did CIA become involved in the prosecution of The
Frogman Case? CIA did make contact with prosecutors in the Zavala
prosecution in order to protect what CIA believed was an operational equity,
i.e., a Contra support group in which it had an operational interest. A CIA
cable indicates that approximately $36,000 seized from Zavala at the time of his
arrest was returned to Zavala--based on the claim they were Contra funds--by the
prosecutors at CIA's request. However, the prosecutors state that the decision
to return Zavala's money was based on other considerations, not CIA's
representations, and that there was no evidentiary value to retaining the money.
In any event, the actions taken by CIA to have the cash returned did not appear
to be intended to influence the outcome of Zavala's trial, which resulted in his
conviction.